Congress’s Online Gambling Ban: Burden Without Benefit, Says Study

Conntact: Richard Morrison, 202-331-2273

Washington, D.C., March 27, 2008—The current laws about Internet gambling have had damaging unintended consequences far beyond their intended target, according to a study published today by the Competitive Enterprise Institute.

The Unlawful Internet Gambling Enforcement Act (UIGEA), passed in October of 2006, has little to do with gambling itself, but is actually a wide-ranging regulatory mandate on banks, credit unions, credit card companies, wire transfer services, and even brokerages. The law forces financial institutions to cut off business with any entity that could possibly be engaged in online gambling transactions.

“The Act is unlikely to stop Internet gambling and could even threaten the stable, smooth operation of America’s banking system,” said Senior Fellow Eli Lehrer and author of the study “Time to Fold the Unlawful Internet Gambling Enforcement Act.”

“UIGEA and its currently proposed enabling regulations will undermine the financial privacy of all Americans and reduce the security of their bank accounts. In short, it makes almost no financial, social, or economic senses,” said Lehrer. 

Some members of Congress are at least aware of the problems with gambling ban. On April 2nd, the House Committee on Financial Services is scheduled to hold a hearing titled “Proposed UIGEA Regulations: Burden without Benefit?” to detail what has gone wrong with its implementation and how to fix it. Ideally, however, they would go much farther.

“Even before it considers proposals for the regulation of online gambling, Congress should consider an outright repeal of the Unlawful Internet Gambling Enforcement Act,” said Lehrer. “The law has very little to do with gambling and serves as a poorly thought-out banking regulation fraught with potentially perverse incentives. Quite simply, it is a bad law. Repealing it makes sense.”